Martha Reagan expects to receive a $550,000 cash benefit when she retires five y

Question

Martha Reagan expects to receive a $550,000 cash benefit when she retires five years from today. Ms. Reagan’s employer has offered an early retirement incentive by agreeing to pay her $350,000 today if she agrees to retire immediately. Ms. Reagan desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not use a factor from a table in a different question, from the book, or from a calculator.)

Calculate the present value. (Round your final answer to the nearest dollar amount.)

Present value=

Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Reagan accept her employer’s offer?

Information needed:

PV of $1- http://lectures.mhhe.com/connect/0073526789/Tables/table_1.jpg

PVA of $1- http://lectures.mhhe.com/connect/0077632370/Table%202.JPG

** please use numbers directly from the tables

Martha Reagan expects to receive a $550,000 cash benefit when she retires five years from today. Ms. Reagan’s employer has offered an early retirement incentive by agreeing to pay her $350,000 today if she agrees to retire immediately. Ms. Reagan desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not use a factor from a table in a different question, from the book, or from a calculator.)

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Amount to be received after 5 Years on retiremnet                       550,000.00 PVF for 5 Years at 10% = (1/1.10)^5                               0.6209 Present Value =550,000*.6209                       341,495.00 Yes Ms. Reagan should accept her employer’s offer as employer has offered 350,000 which is more than PV of 341,495

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